MSCI Russia announced the results of the May review

Analysis:

Ozon joined the MSCI Russia Index with a 0.8% weight and a 20% free-float (FF). Ozon became the 25th company in the MSCI Russia Index, bringing its components number close to its all-time high, but Russia's weight in MSCI EM (Emerging Markets), at about 3%, remains low, amid rapid growth of Asian economies, mainly China. We expected a 1.1% weight and a 20% FF. The effective date is May 28, 2021.

NLMK’s FIF (Free Float/Foreign Inclusion Factor) increased to 25%, Polymetal’s - to 75% and the Moscow Exchange’s - to 65%, driving an $250 mln inflow. The effective date is May 28, 2021

Implications and recommendations:

Ozon shares closed up 4.5% on Nasdaq on May 11 and advanced 2.9% on the Moscow Exchange on May 12. The growth is driven by an inflow of $110 mln of active funds.

The rally will resume on May 28, when the review’s results will take effect, driving a $55 mln inflow of passive funds. Our target for Ozon is ₽4 500 on the Moscow Exchange and $59.4 on the Nasdaq.

Rusal didn’t join the MSCI Russia Index, which means that the minimum threshold for inclusion of companies by market capitalization and free float-adjusted capitalization criteria was raised.

The new threshold could be $4 600 mln instead of $3 600 mln, and the free float-adjusted threshold could be $2 200-$2 300 mln instead of $1 600 mln earlier.

Therefore, the hike significantly reduces the chances of MMK's inclusion in November, as the company needs to increase its free-float capitalization by $272 million. However, there are still chances for Rusal to join the index in November, as its free-float capitalization is $150 mln above the new MSI Russia threshold.

 MSCI Russia

Source: MSCI, ITI Capital

Iskander Lutsko
13.05.2021
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